This just happened to me after adding a new emulator image, based on Pixel 3. Seems this operation downloaded new phone profile definitions, and AVD matched these to my other emulator images as well, forcing the DPI to the phone profile and ignoring the DPI set in the actual settings.

I'm emulating an industrial handheld low res device (480x854), the result was comically chaotic : in the Pixel 3 device, icons on the home page were absolutely tiny, while icons in settings and app list where so huge, one would fill the entire screen.

Solution : change the phone profile used by the emulator to one that actually matches the DPI you want.